Tunisia - Small Scale Industry Development Project : Loan 1969 - Loan Agreement - Conformed

OFIIA,LOAN NUMBER 1969 TUN Loan Agreement (Small Scale Industry Development Project) between REPUBLIC OF TUNISIA and INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Dated , 1981 LOAN NUMBER 1969 TUN LOAN AGREEMENT AGREEMENT, dated 7 , 1981, between REPUBLIC OF TUNISIA (hereinafte called the Borrower) and INTER- NATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT (hereinafter called the Bank). ARTICLE 1 General Conditions; Definitions Section 1.01. The parties to this Agreement accept all the provisions of the General Conditions Applicable to Loan and Guarantee Agreements of the Bank, dated October 27, 1980, with the same force and effect as if they were fully set forth herein, subject, however, to the modifications thereof set forth in Schedule 3 to this Agreement (said General Conditions Applicable to Loan and Guarantee Agreements of the Bank, as so modified, being hereinafter called the General Conditions). Section 1.02. Wherever used in this Agreement, unless the context otherwise requires, the several terms defined in the General Conditions have the respective meanings therein set forth and the following additional terms have the following meanings: (a) "SSI Enterprise" means a small-scale industrial enter- prise to which any of the Participating Banks on behalf of the Borrower proposes to make or has made a Sub-loan. (b) "Sub-loan" means a loan made or proposed to be made under Section 3.01 (a) (i) of this Agreement by any of the Par- ticipating Banks out of the proceeds of the Loan to an SSI Enter- rzise for an SSI Investment Project; and "free-limit Sub-loan" means a Sub-loan, as so defined, which qualifies as a free-limit Sub-loan pursuant to the provisions of Section 2.02 (b) of this Agreement. (c) "SSI Investment Project" means a specific development project in the small scale industry sector to be carried out by an SSI Enterprise utilizing the proceeds of a Sub-loan and which shall meet the selection criteria set forth in paragraph 1 of Schedule 2 to this Agreement. (d) "Dinars" and "D" mean the currency of the Borrower. -2- (e) "foreign currency" means any currency other than the currency of the Borrower. (f) "BCT" means Bngnue Centrale de Tunisie. (g) "BDET" means Banque de Developpement Economique de Tunisie. (h) "Participating Banks" means BDET and any commercial bank party to the Financing Agreement. (i) "API" means Agence de Promotion des Investissements, an agency of the Borrower operating under the supervision of the Ministry of National Economy of the Borrower. (j) "FOPRODI" means the Fonds de Promotion et de Decentra- lisation Industrielle, a,fund financed out of the Borrower's budget established and operating under the Borrower's Laws for the purpose of providing credit to promoters of SSI Investment Projects with limited personal assets. (k) "Project Account" means the account to be opened by the Borrower with BCT as provided in Section 3.01 (c) of this Agree- ment for the purpose of making available the proceeds of the Loan to the Participating Banks for Sub-Loans. (1) "Financing Agreement" means the agreement to be con- cluded pursuant to Section 3.01 (d) of this Agreement between the Borrower, BCT, API, BDET and selected commercial banks. ARTICLE II The Loan Section 2.01. The Bank agrees to lend to the Borrower, on the terms and conditions in the Loan Agreement set forth or referred to, an amount in various currencies equivalent to thirty million dollars ($30,000,000). Section 2.020 (a) The amount of the Loan may be withdrawn from the Loan Account for amounts paid (or, if the Bank shall so agree, for amounts to be paid) by the Borrower on account of: (i) withdrawals made by an SSI Enterprise under a Sub-loan to meet 50% of the reasonable total cost - 3 - of goods, works and services required for an SSI Investment Project in respect of which the with- drawal from the Loan Account is requested; pro- vided, however, that, except as the Borrower and the Bank may otherwise agree, no withdrawal shall be made: (A) in respect of a Sub-loan unless (1) the Sub-loan shall have been approved by the Bank, or (2) the Sub-loan shall be a free-limit Sub-loan for which the Bank shall have authorized withdrawals from the Loan Account; (B) in excess of an aggregate amount of the equivalent of $14,675,000 for SSI Investment Projects with an investment cost exceeding D 250,000; (C) in excess of an aggregate amount of the equivalent of $19,350,000 for SSI Investment Projects other than those benefitting from the financial assistance of FOPRODI; and (ii) the reasonable foreign currency cost of services required for the provision of assistance to API pursuant to paragraph (a) (iii) of Section 3.01 of this Agreement; provided, however, that: (A) except as the Bank may otherwise agree, the aggre- gate amount of such withdrawals shall not exceed $650,000 equivalent; (B) if the Borrower shall have established to the satisfaction of the Bank that funds from alternative sources are available to the Borrower for the financing of the cost of said services, the entire amount of the Loan may be withdrawn from the Loan Account pursuant to the provision of paragraph (i) above. (b) Except as the Bank may from time to time otherwise determine, a free-limit Sub-loan shall be a Sub-loan to an SSI Enterprise in an amount to be financed out of the proceeds of the Loan which shall not exceed the sum of D 125,000 equivalent, when added to any other outstanding amounts financed or proposed to be financed out of the proceeds of the Loan for Sub-loans to such SSI Enterprise; provided, however, that the first two Sub-loans to be made by any Participating Bank shall not qualify as free-limit Sub-loans irrespective of the amount thereof. -4- (c) Except as the Bank and the Borrower shall otherwise agree, no withdrawals shall be made on account of: (i) expendi- tures before the date of this Agreement, or (ii) expenditures by an SSI Investment Enterprise in respect of a Sub-loan subject to the Bank's approval if such expenditures shall have been made more than ninety days prior to the date on which the Bank shall have received in respect of such Sub-loan the application and informa- tion required by Section 2.03 (a) of this Agreement or, in respect of a free-limit Sub-loan, more than ninety days prior to the date on which the Bank shall have received in respect of such free- limit Sub-loan the request and information required by Section 2.03 (b) of this Agreement. Section 2.03. (a) When presenting a Sub-loan (other than a free-limit Sub--loan) to the Bank for approval, the Borrower shall furnish to the Bank an application, in form satisfactory to the Bank, together with: (i) a description of the SSI Investment Enterprise and an appraisal of the SSI Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; (ii) the proposed terms and conditions of the Sub-loan, including the schedule of amortization of the Sub-loan; and (iii) such other information as the Bank shall reasonably request. (b) Each request by the Borrower for authorization to make withdrawals from the Loan Account in respect of a free-limit Sub-loan shall contain: (i) a summary description of the SSI Investment Enterprise and the SSI Investment Project, including a description of the expenditures proposed to be financed out of the proceeds of the Loan; and (ii) the terms and conditions of the Sub-loan, including the schedule of amortization therefor. (c) Except as the Bank and the Borrower shall otherwise agree, applications and requests made pursuant to the provisions of paragraphs (a) and (b) of this Section shall be presented to the Bank on or before June 30, 1984. Section 2.04. The Closing Date shall be December 31, 1986 or such later date as the Bank shall establish. The Bank shall promptly notify the Borrower of such later date. Section 2.05. The Borrower shall pay to the Bank a commitment charge at the rate of three-fourths of one per cent (3/4 of 1%) per annum on the principal amount of the Loan not withdrawn from time to time. - 5 - Section 2.06. The Borrower shall pay interest at the rate of nine and three-fifths per cent (9-3/5%) per annum on the principal amount of the Loan withdrawn and outstanding from time to time. Section 2.07. Interest and other charges shall be payable semiannually on January 1 and July 1 in each year. Section 2.08. (a) The Borrower shall repay the principal amount of the Loan in accordance with the amortization schedule set forth in Schedule 1 to this Agreement as such Schedule shall be amended from time to time by the Bank to the extent required to: (i) conform in relevant part substantially to the aggregate of the amortization schedules applicable to Sub-loans which have been approved or authorized for withdrawals from the Loan Account under Section 2.02 of this Agreement; and (ii) take into account any cancellation pursuant to Article VI of the General Conditions and any repayments made by the Borrower under Section 2.09 of this Agreement; provided that repayments due hereunder shall be made on January 1 and July 1 in each year. Such amendments of said Schedule 1 shall include amendments to the table of premiums on prepayment, if necessary. (b) The amortization schedule applicable to each Sub-loan shall provide for an appropriate period of grace, and, unless the Bank and the Borrower shall otherwise agree: (i) shall not extend beyond thirteen years from the date of approval by the Bank of such Sub-loan, or in the case of a free-limit Sub-loan, of authorization by the Bank to make withdrawals from the Loan Account in respect thereof; and (ii) shall provide for approxi- mately equal semiannual, or more frequent, aggregate payments of principal and interest or approximately equal semiannual, or more frequent, payments of principal. (c) The Borrower shall transmit to the Bank, for its prior approval, any substantial changes proposed to be made by the Borrower in respect of the repayment provisions of any Sub-loan. Section 2.09. Unless the Bank and the Borrower shall other- wise agree: (a) If a Sub-loan or any part thereof shall be repaid to the Borrower in advance of maturity or if a Sub-loan or any part thereof shall be sold, transferred, assigned or otherwise disposed of 'or value by the Borrower, the Borrower shall promptly notify -6- the Bank and shall repay to the Bank on the next following interest payment date, together with the premiums specified in Schedule 1 to this Agreement or in any amendment thereof under Section 2.08 (a) of this Agreement, the amount withdrawn from the Loan Account in respect of such Sub-loan or part thereof and not theretofore repaid to the Bank. (b) Any amount so repaid by the Borrower shall be applied by the Bank to the maturity or maturities of the Loan in amounts corresponding to the outstanding amounts of the maturity or maturities of the Sub-loan so repaid or disposed of. (c) Paragraph (b) of Section 3.05 of the General Conditions shall not apply to any repayment made under paragraph (a) of this Section. Section 2.10. BCT is designated as representative of the Borrower for the purposes of taking any action required or permitted to be taken under the provisions of Sections 2.02 and 2.03 of this Agreement and Article V of the General Conditions. ARTICLE III Execution of the Project Section 3.01. (a) The purpose of the Project is to assist the Borrower in providing financial and other assistance to such productive facilities and resources in Tunisia as will contribute to the development of small scale industrial enterprises and to the economic and social development of the country. The Project consists of: (i) the financing of the cost of SSI Investment Projects through Sub-loans to SSI Enterprises in Tunisia through Participating Banks; (ii) the provision of technical assistance by API, and such other promotional and advisory entities as may be selected for the purpose by agreement between the Borrower and the Bank, to small scale industrial enterprises to strengthen their manage- ment capabilities in the fields of, inter alia, production marketing and finance; and -7- (iii) the provision of assistance to API in the evalua- tion of the economic, financial and technical viability of SSI Investment Projects. (b) The Borrower shall carry out the Project and cause the Project to be carried out with due diligence and efficiency and in conformity with appropriate administrative, banking and financial practices and in accordance with the provisions of Schedule 2 to this Agreement. (c) The Borrower shall open and maintain an account with BCT for the purpose, inter alia, of making available proceeds of the Loan to Participating Banks for the Sub-loans. (d) The Borrower shall enter into a financing agreement with BCT, API, BDET and such selected commercial banks in Tunisia as may from time to time accede to such agreement, said agreement to be at all times satisfactory to the Bank and, except as the Bank shall otherwise agree, to include, inter alia, the requirements set forth in Schedule 2 to this Agreement. (e) The Borrower shall exercise its rights under the Financing Agreement in such manner as to protect the interests of the Borrower and the Bank and to accomplish the purposes of the Loan, and except as the Bank shall otherwise agree, the Borrower shall not assign, nor amend, abrogate or waive the Financing Agreement or any provision thereof. Section 3.02. In order to assist the Borrower in providing to API the assistance referred to in paragraph (a) (iii) of Section 3.01 of this Agreement, the Borrower shall, not later than nine months of the date of this Agreement, employ or cause API to employ consultants whose qualifications, experience and terms and conditions of employment shall be satisfactory to the Bank. Section 3.03. (a) The Borrower shall ensure that, unless the Bank shall otherwise agree, any Sub-loan will be made on terms whereby the Participating Bank shall obtain, by written contract with the SSI Enterprise or by other appropriate legal means, rights adequate to protect the interests of the Bank, the Borrower and the Participating Bank, including the right of the Borrower and the Participating Bank to: (i) require the SSI Enterprise to carry out and operate the SSI Investment Project with due dili- gence and efficiency and in accordance with sound technical, financial and managerial standards and to maintain adequate -8- records; (ii) require that: (1) the goods, works and services to be financed out of the proceeds of the Loan shall be procured at a reasonable price, after having obtained, in the case of goods (other than those financed to satisfy the permanent working capital requirements of an SSI Enterprise) or works, price quotations from at least three suppliers or contractors (except in exceptional circumstances for which justification will be provided) and account being taken also of other relevant factors such as time of delivery and efficiency and reliability of the goods and availability of maintenance facilities and spare parts therefor, and, in the case of works or services, their quality and the competence of the parties carrying out the works or rendering the services, and (2) such goods, works and services shall be used exclusively in the carrying out of the SSI Investment Project; (iii) inspect, by itself or jointly with representatives of the Bank if the Bank shall so request, such goods and the sites, works, plants and construction included in the SSI Investment Project, the operation thereof, and any relevant records and documents; (iv) require that: (1) the SSI Enterprise shall take out and maintain with responsible insurers such insurance, against such risks and in such amounts, as shall be consistent with sound business practice, and (2) without any limitation upon the fore- going, such insurance shall cover hazards incident to the acquisi- tion, transportation and delivery of goods financed out of the proceeds of the Loan to the place of use or installation, any indemnity thereunder to be made payable in a currency freely usable by the SSI Enterprise to replace or repair such goods; (v) obtain all such information as the Borrower, the Bank or the Participating Bank shall reasonably request relating to the foregoing and to the administration, operations and financial condition of the SSI Enterprise and to the benefits to be derived from the SSI Investment Project; and (vi) suspend or terminate the right of the SSI Enterprise to the use of the proceeds of the Loan upon failure by such SSI Enterprise to perform its obligations under its contract with the Participating Bank. (b) The Borrower shall exercise its rights, directly or through the Participating Bank, in relation to each SSI Investment Project in such manner as to: (i) protect the interests of the Borrower, the Bank and the Participating Banks, (ii) comply with its obligations under this Agreement, and (iii) achieve the purposes of the Project. Section 3.04. (a) The Borrower shall furnish annually to the Bank for its review and comments the programs for the technical - 9 - assistance referred to in paragraph (a) (ii) of Section 3.01 of this Agreement as well as the proposed plans of action for the carrying out of such programs. (b) Without limitation to the provisions of paragraph (b) of Section 3.01 of this Agreement, the Borrower shall cause said programs to be duly implemented and shall provide, promptly as needed, the funds, facilities, services and other resources required for the purpose. Section 3.05. (a) The Borrower shall furnish or cause to be furnished to the Bank at regular intervals all such information as the Bank shall reasonably request concerning the expenditure of the proceeds of the Loan, the Project, the SSI Investment Enterprises, the SSI Investment Projects, the Sub-loans and, where appropriate, the benefits to be derived from the foregoing; it being understood that such information to be furnished to the Bank at regular intervals shall include, inter alia, an annual supervision report to be prepared by API, in accordance with a format acceptable to the Bank, describing the SSI Investment Projects for which Sub-loans were made during the year concerned and showing the sub-sector, regional and enterprise size trends for the respective types of small scale industrial activities during such year and a forecast of such activities for the coming year. (b) Within six months following the last withdrawal from the Loan Account, the Borrower shall prepare and furnish or cause to be prepared or furnished to the Bank a report, of such scope and in such detail as the Bank shall reasonably request, on the execution and initial operation of the Project and the Sub-loans, their costs and the benefits derived and to be derived from them, the performance by the Borrower and the Bank of their respective obligations under this Agreement and the accomplishment of the purposes of the Loan. Section 3.06. The Borrower shall duly perform all its obligations in agreements under which funds, within the framework of SSI Investment Projects, have been lent or otherwise put at the disposal of the Participating Banks by the Borrower for relending, investment or management. The Borrower shall promptly inform the Bank of any action which would have the effect of assigning, or of amending, abrogating or waiving any material provision of, any such agreement. - 10 - ARTICLE IV Other Covenants Section 4.01. (a) It is the policy of the Bank, in making loans to, or with the guarantee of, its members not to seek, in normal circumstances, special security from the member concerned but to ensure that no other external debt shall have priority over its loans in the allocation, realization or distribution of foreign exchange held under the control or for the benefit of such member. To that end, if any lien shall be created on any public assets (as hereinafter defined), as security for any external debt, which will or might result in a priority for the benefit of the creditor of such external debt in the alloca- tion, realization or distribution of foreign exchange, such lien shall, unless the Bank shall otherwise agree, ipso facto and at no cost to the Bank, equally and ratably secure the principal of, and interest and other charges on, the Loan, and the Borrower, in creating or permitting the creation of such lien, shall make express provision to that effect; provided, however, that, if for any constitutional or other legal reason such provision cannot be made with respect to any lien created on assets of any of its political or administrative subdivisions, the Borrower shall promptly and at no cost to the Bank secure the principal of, and interest and other charges on, the Loan by an equivalent lien on other public assets satisfactory to the Bank. (b) The foregoing undertaking shall not apply to: (i) any lien created on property, at the time of purchase thereof, solely as security for payment of the purchase price of such property; and (ii) any lien arising in the ordinary course of banking transactions and securing a debt maturing not more than one year after its date. (c) As used in this Section, the term "public assets" means assets of the Borrower, of any political or administrative subdivision thereof and of any entity owned or controlled by, or operating for the account or benefit of, the Borrower or any such subdivision, including gold and foreign exchange assets held by any institution performing the functions of a central bank or exchange stabilization fund, or similar functions, for the Borrower. Section 4.02. (a) The Borrower shall maintain or cause to be maintained records adequate to reflect in accordance with - 11 - consistently maintained sound accounting practices the operations, resources and expenditures, in respect of the Project, of the departments or agencies of the Borrower responsible for carrying out the Project or any part thereof. (b) The Borrower shall take all necessary measures to enable the Bank's accredited representatives to examine the records referred to in paragraph (a) of this Section and the Project Account, and any relevant documents. Section 4.03. Not later than six months after the Effective Date, and thereafter annually, the Bocrower shall exchange views with the Bank in respect of the Borrower's policies for the development of the small scale industrial enterprise sector in Tunisia. Such exchange of views shall extend to, inter alia, existing measures to implement said policies and their impact on said sector, as well as proposed measures for the development of the said sector such as the introduction of specific investment incentives, of a guarantee fund for credits to small scale enter- prises and of other measures in respect of lending to small scale enterprises. ARTICLE V Remedies of the Bank Section 5.01. For the purposes of Section 6.02 of the General Conditions, the following additional events are specified pursuant to paragraph (k) thereof: (a) the Borrower or any other authority having jurisdiction shall have taken any action for the dissolution, or for the suspension of the operations, of BCT, FOPRODI or API; (b) any action shall have been taken for the dissolution or liquidation of any of the Participating Banks, which would as a consequence materially and adversely affect the carrying out of the Project or the performance by the Borrower of its obligations under this Agreement; (c) any of the parties to the Financing Agreement shall have failed to perform any covenant, agreement or obligation thereunder and such failure would materially and adversely affect the carry- ing out of the Project or the performance by the Borrower of its obligations under this Agreement; and - 12 - (d) an extraordinary situation shall have arisen which shall make it improbable that the parties to the Financing Agreement will be able to perform their obligations thereunder. Section 5.02. For the purposes of Section 7.01 of the General Conditions, the following additional events are specified pursuant to paragraph (h) thereof: (a) any event specified in paragraph (c) of Section 5.01 of this Agreement shall occur and shall continue for a period of 60 days after notice thereof shall have been given by the Bank to the Borrower; and (b) the events specified in paragraphs (a) and (b) of Section 5.01 of this Agreement shall occur. ARTICLE VI Effective Date; Termination Section 6.01. The following events are specified as addi- tional conditions to the effectiveness of the Loan Agreement within the meaning of Section 12.01 (c) of the General Conditions: (a) the Financing Agreement has been executed on behalf of the parties referred to in Section 3.01 (d) of this Agreement, including at least three Participating Banks including Banque de Developpement Economique de Tunisie; and (b) the Project Account has been opened. Section 6.02. The following is specified as an additional matter, within the meaning of Section 12.02 (c) of the General Conditions, to be included in the opinion or opinions to be furnished to the Bank, namely, that the Financing Agreement has been duly authorized or ratified by, and is legally binding upon, the parties thereto. Section 6.03. The date / l /7 , is hereby specified for the purposes of Section 12.04 of the General Condi- tions. - 13 - ARTICLE VII Representative of the Borrower; Addresses Section 7.01. The Ministre du Plan et des Finances of the Borrower is designated as representative of the Borrower for the purposes of Section 11.03 of the General Conditions. Section 7.02. The following addresses are specified for the purposes of Section 11.01 of the General Conditions: For the Borrower: Ministere du Plan et des Finances 7, Place Ali Zouaoui Tunis Tunisia Cable address: Telex: Ministere du Plan MIPLAN et des Finances 12117 TUN Tunis For the Bank: International Bank for Reconstruction and Development 1818 H Street, N.W. Washington, D.C. 20433 United States of America Cable address: Telex: INTBAFRAD 440098 (ITT) Washington, D.C. 248423 (RCA) or 64145 (WUI) IN WITNESS WHEREOF, the parties hereto, acting through their representatives thereunto duly authorized, have caused this Agreement to be signed in their respective nawes in the - 14 - District of Columbia, United States of America, as of the day and year first above written. REPUBLIC OF TUNISIA By Authorized Representative INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Regional Vice President· Europe, Middle East and North Africa - 15 - SCHEDULE 1 Amortization Schedule* Dayment of Principal Date Payment Due (expressed in dollars)** On each January 1 and July 1 beginning January 1, 1985 1,200,000 through January 1, 1997 * The Amortization Schedule is subject to amendment pursuant to the provisions of Section 2.08 of the Loan Agreement. ** To the extent that any portion of the Loan is repayable in a currency other than dollars (see General Conditions, Section 4.04), the figures in this column represent dollar equivalents determined as for purposes of withdrawal. - 16 - Premiums on Prepayment The following percentages are specified as the premiums payable on repayment in advance of maturity of any portion of the principal amount of the Loan pursuant to Section 3.04 (b) of the General Conditions or to Section 2.09 (a) of the Loan Agreement: Time of Prepayment Premium Not more than three years 1.80% before maturity More than three years but not 3.60% more than six years before maturity More than six years but not 6.60% more than eleven years before maturity More than eleven years but not 8.40% more than fourteen years before maturity More than fourteen years 9.60% before maturity - 17 - SCHEDULE 2 Selection criteria of SSI Investment Projects; Responsibilities and procedures in respect of, and terms and conditions of, Sub-loans Selection criteria of SSI Investment Projects 1. (a) SSI Investment Projects shall meet the following criteria: (i) the total estimated cost of an SSI Investment Project shall not exceed D 500,000; (ii) an SSI Investment Project shall be expected to result in the creation or maintenance of employment with an average investment cost per job created or maintained not exceeding D 6,900, as such amount may be adjusted every six months, on the basis of increases in the wholesale price index for indus- trial products published by the Borrower, to take account of inflation as it affects the cost of imported goods; and (iii) all SSI Investment Projects must be expected to yield a reasonable internal financial rate of return (at least 10%) during the life of the respective Sub-loan. (b) For the purposes of paragraph (a) (i) above, the cost of an SSI Investment Project shall be determined as the value of fixed assets, including land and buildings, to be acquired and of relating initial permanent working capital requirements; provided, however, that in the case of expansion or modernization of an existing SSI Enterprise, such cost shall be the aggregate of the estimated value of existing fixed assets net of depre- ciation, and of the new assets to be acquired under the SSI Investment Project and of the additional permanent working capital requirements. (c) For the purposes of paragraph (a) (ii) above, the cost per job resulting from an SSI Investment Project shall be calculated as follows: - 18 - (i) in the case of the creation of a new enterprise or expansion of existing facilities and equipment, by dividing the cost of the SSI Investment Project, such cost to be determined as the value of fixed assets, including buildings but excluding land, to be acquired and of relating initial permanent working capital requirements, by the total number of employees for whom jobs would be created; and (ii) in the case of the modernization of existing SSI Enterprises, by dividing the cost of the SSI Investment Project, such cost to be determined as the aggregate of the estimated value of existing fixed assets net of depreciation and of the new assets to be acquired under the SSI Investment Project and of the additional permanent working capital requirements, by the number of employees for whom jobs would be created or maintained. Responsibilities of BCT, API and the Participating Banks in the processing of Sub-loans 2. Identification, initial screening and appraisal of eligible SSI Investment Projects shall be the responsibility of the Participating Banks. Sub-loan applications shall be prepared by Participating Banks in the case of SSI Investment Projects which Participating Banks shall have decided to finance and shall specify such intent. Sub-loan applications shall be prepared in several copies and be furnished to API. The Participating Banks shall prepare an appraisal report in a form acceptable to the Borrower and the Bank to accompany each Sub-loan application. Such appraisal report shall specify, inter alia: (a) the name of the SSI Enterprise, the industrial sub- sector to which the SSI Investment Project belongs, its location, as well as appropriate information concerning the promoter; (b) the number of jobs to be created and/or to be main- tained; (c) the total estimated cost of the SSI Investment Project, including working capital requirements; - 19 - (d) a description of the technological processes to be used and a summary list of goods and services to be procured for the SSI Investment Project including in particular expenditures proposed to be financed out of the proceeds of the Loan; (e) a breakdown of the foreign exchange and local components of the cost of each SSI Investment Project; (f) a discussion of the marketing aspects of the project, including a supply and demand analysis, price forecasts and distribution channels; (g) the internal financial rate of return of the SSI Invest- ment Project; (h) the level of the tariff duty for imported products competing with the goods to be produced by the SSI Enterprise; the domestic price/C.I.F. price ratio for such products; and any Government subsidization of production inputs, sale prices, and interest rates, together with relevant documentation; (i) the value added per job created (or maintained in case of modernization sub-projects) and, if it is low com- pared to the investment cost per job and sub-sectoral standards, explanations therefor; (j) the amount, terms and conditions (including the amorti- zation schedule) of the Sub-loan and of the other sources of financing; and (k) the technical assistance needs, if any, of the SSI Investment Project and the most appropriate ways to meet them. 3. The financing plan for an SSI Investment Project shall follow the following proportions in percentage of estimated total invest- ment cost, including working capital: (a) equity (part of which may be financed out of the FOPRODI credit facility) shall not be less than 30%; (b) the Sub-loan shall not exceed 50%; and - 20 - (c) not less than 20% shall be financed by a term loan extended by the Participating Bank sponsoring the SSI Investment Project out of its own resources. 4. The appraisal report referred to in paragraph 2 of this Schedule shall be sent by the Participating Bank sponsoring the SSI Investment Project to API for its review. In carrying out this review, API will assess the economic, financial and tech- nical viability of the SSI Investment Project and verify whether it satisfies the selection criteria set forth in paragraph 1 above. In respect of SSI Investment Projects whose cost, as defined under paragraph 1 (b) above, shall exceed D 250,000, API shall, in all cases where the rate of protection applicable to the products of the SSI Enterprise shall exceed 30%, compute a modi- fied internal financial rate of return by modifying the computa- tion used for purposes of paragraph 1 (a) (iii) above by substitu- ting C.I.F. prices of imported products competing on the domestic market with the products sold by the SSI Enterprise for the domestic sale price of such products and by reducing the relating labor cost by 25%. When such modified internal financial rate of return shall be less than 10%, API shall duly assess the justifi- cation of the SSI Investment Project in this light. In each case, API will prepare a summary report describing the above assessment and verification and providing for its recommendations in respect of the SSI Investment Project. API shall also assess the needs for technical assistance, if any, and include in the above summary report appropriate recommendations to meet such needs. If API shall, on the basis of said review, be satisfied that the SSI Investment Project meets the selection criteria set forth in paragraph 1 above an is economically, financially and technically viable, API shall send the Sub-loan application to BCT, together with the related appraisal report and API's summary report referred to above. 5. BCT shall perform the following functions upon receipt of a Sub-loan application: (a) forward or cause to be forwarded to the Bank, on behalf of the Borrower, applications and requests to be made pursuant to paragraphs (a) and (b) of Section 2.03 of the Loan Agreement; (b) forward to the Bank, on behalf of the Borrower, with- drawal applications from the Loan Account; and - 21 - (c) maintain the necessary documentation available for examination by Bank supervision missions. 6. Withdrawals in respect of Sub-loans which shall have been approved by the Bank or for which authorization to make with- drawals from the Loan Account has been given by the Bank shall be made by the Participating Banks from the Project Account. Such Account shall be credited, from time to time, with proceeds from the Loan Account, pursuant to witidrawals made by BCT. Terms and conditions of Sub-loans (additional to the terms set forth in Section 3.03 (a) of this Agreement) 7. Sub-loans shall carry interest on the principal outstanding from time to time at an annual rate at least equal to the interest rate charged by Tunisian commercial banks on medium-term loans, which are rediscountable at the ordinary rate, to industrial enterprises at the time of granting the Sub-loan. 8. The amortization schedule for each Sub-loan shall provide for an appropriate grace period of not more than three years and shall take into account the economic life of the investment as well as the projected capacity of the SSI Enterprise to reimburse the Sub-loan but shall not exceed thirteen years, including the grace period. Debt-service and risk-sharing arrangements 9. The SSI Enterprise's obligations on account of payment of principal, interest and other charges'in respect of the Sub-loans shall be toward the Borrower but the responsibility of collecting such payments shall remain with the Participating Bank sponsoring the SSI Investment Project. Participating Banks shall ensure that such payments are made upon maturity and shall immediately thereafter forward such payments to the Project Account. 10. Losses on both Sub-loan and term loan made by the Partici- pating Bank sponsoring an SSI Investment Project out of its own resources shall, to the extent that all legal remedies have been exhausted, be shared: (a) 2/3-1/3 between the Borrower and the Participating Bank, respectively, in the case of SSI Investment Projects benefitting from FOPRODI financial assistance; and (b) evenly between the Borrower and the Participating Bank in other cases. - 22 - Special incentive to Participating Banks 11. A mechanism to be determined by agreement between the Bor- rower and the Bank shall be introduced and implemented by BCT whereby each Sub-loan made by a Participating Bank will entail an increase in such Participating Bank's share in the ordinary. rediscount quota. Remuneration of the Participating Banks 12. The Participating Banks will obtain from the Borrower a remuneration for their services in managing the Sub-loans financed out of the Loan proceeds consisting of commissions providing an incentive to use the proceeds of the Loan including: (a) a one- time commission amounting to three percent of disbursements under Sub-loans committed during the first year following the Effective Date, and two percent of disbursements under Sub-loans committed thereafter; and (b) a one-time commission amounting to seven percent of the principal amount effectively collected from SSI Investment Enterprises under Sub-loans in the case of full collec- tion, declining progressively to one percent in the case of less than 50% collection. The incentive resulting from this commission or these commissions shall not be less than the one resulting from the arrangements for the remuneration of the Participating Banks under the existing FOPRODI credit facilities. . ... .. .. - 23 - SCHEDULE 3 Modifications of the General Conditions For the purposes of the Loan Agreement, the provisions of the General Conditions are modified as follows: (1) The following subparagraph (d) is added to Section 3.04: "(d) The Bank and the Borrower may from time to time agree upon arrangements for prepayment of the Loan and the application of such prepayment in addition to, or in substitution for, those set forth in paragraph (b) of Section 3.04." (2) The words "or SSI Investment Projects" are added after the words "the Project" at the end of Section 5.03. (3) Section 6.03 is deleted and replaced by the following new Section: "Section 6.03. Cancellation by the Bank. If: (a) the right of the Borrower to make withdrawals from the Loan Account shall have been suspended with respect to any amount of the Loan for a continuous period of thirty days, or (b) by the date specified in paragraph (c) of Section 2.03 of the Loan Agreement no applications or requests permitted under paragraph (a) or paragraph (b) of such Section shall have been received by the Bank in respect of any portion of the Loan, or having been so received, shall have been denied, or (c) at any time the Bank determines, after consultation with the Borrower, that an amount of the Loan will not be required to finance the Project's costs to be financed out of the proceeds of the Loan, or (d) after the Closing Date an amount of the Loan shall remain unwithdrawn from the Loan Account, the Bank may by notice to the Borrower terminate the right of the Borrower to submit such applications or requests or to make withdrawals from the Loan Account, as the case may be, with respect to such amount or portion of the Loan. Upon the giving of such notice such amount or portion of the Loan shall be cancelled." INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT CERTIFICATE I hereby certify that the foregoing is a true copy of the original in the archives of the Interna- tional Bank for Reconstruction and Develop- ment. In witness whereof I have signed this Certifi- cate and affixed the Seal of the Bank thereunto this /5IL day of - a , 198 L. FOR SECRETARY